had to withdraw an image features photo shopped pictures of leaders kissing, mostly adversaries, like president obama and venezuela's hugo chavez, palestinian leader mahmoud abbas and israeli prime minister yet yahoo. the image of a pope was declared unacceptable by the vatican. kiss that one good-bye. we unhate to see it go jeanne moos, cnn, new york. >> that's it for me. i'm wolf blitzer. the news continues next on cnn. the news continues next on cnn. e -- captions by vitac -- www.vitac.com tonight president obama addresses parliament this hour and makes a new military investment in the south pacific that isn't sitting well in china. plus newt gingrich doesn't seem to think much of fannie mae and freddie mac. >> the two biggest debtors in the american system and the most dangerous companies for

imploding. >> would it surprise you to know the same newt gingrich was paid more than $1.5 million to help freddie mac make friends. >> i was glad to offer strategic advice. we did it for a number of companies. the group was very successful. >> grinning rich sees no conflict. his critics see hypocrisy. we begin with breaking news. a new judge will preside over the case of new penn state football coach jerry sandusky, this change prompted by complaints the first tie had ties to the charity second mile. new changes about whether the changing story of a key witness jeopardizes the criminal case against sandusky who is accused of raping at least eight young boys. the mother of one of sandusky's alleged victims says she's sickened he's free on bail and sickened to broadcast an interview in which he proclaims he does nothing wrong. >> it makes me really sad my son can't go out and have a normal life, he can't go hang out at

the hall because he might run integerry. he gets to go to the mall and shop and do whatever he wants to do. that aggravates me. he should be in jail. >> we begin with sarah gan ham, a reporter. you had a clans to look at a police report involving a key witness in this case, mike mcqueary. tell us about it. >> reporter: well, i did review this document. it's about two pages. it does say that mike mcqueary, it says a lot of what he said in his grand jury testimony. it does not say anything about him talking to police or about him stopping the assault which he says he saw in progress. that's different from an e-mail that we saw yesterday that -- where mike mcqueary is telling me he did do something to make sure the assault stops, talked to police as well as university officials. this document outlines what he saw, what happened that night.

he says that it all went down in just about a minute. so it wasn't very long at all. like i said, it doesn't say anything about police in the document at all. >> more on that in just a minute, that conflicting story, the conflict in that story could be important as this case proceeds towards trial. sara, the first judge freed sandusky on bail. prosecutors objected to that. why the new judge and what do we know about that? >> reporter: we know that robert e. scott, a senior judge from westmoreland county, pennsylvania, is going to be hearing the preliminary hearing on december 7th. the administrative office for pennsylvania courts which oversees judges says this comes because he doesn't have any known ties to penn state or to the second mile which is the charity that jerry sandusky founded and where grand jurors say he found his victims. you could be hard pressed to find people in this town that don't have ties to penn state or

the second mile. the second mile is a big charity. penn state is obviously a big part of this town. it's something we've been talking about all week, is that people tend to have some connection in some way to one or two of those organizations. so this judge was brought in from out of town so that that doesn't become an issue. >> sara, one more quick one. in firing essentially joe paterno, penn state trying to turn the page. you learned important information that bradley himself does have at least a modest role in this investigation. >> reporter: yeah, he did testify. we did learn that tonight, john. we don't know what he testified to. it was over the summer. nothing about his testimony is mentioned in that 23-page grand jury indictment. so we don't know exactly what he testified to or if it was important to the investigation. we just know that he was a witness. >> sara ganim on the campus. thank you. coach sandusky is accused of

sexually molesting boys over a 15-year period, when our next guest was a graduate assistant. nat not only looked with jerry sandusky and joe paterno, he brings unique perspective to this story because he was sexually abused as a child. i want to thank you for sharing your story with us tonight. let me start with your time at penn state and your relationship with jerry sandusky. when you were there at the time, any red flags or suspicions? >> i didn't think there was anything going on. i know he was surrounded all the time by little boys. it was part of his second mile foundation. they were around the program a lot. i would notice that on the camps in the summer when we had a lot of kids come up, he'd be a little more touchy feely or poking at them more readily than i thought was appropriate. but outside of that, i never saw him conduct himself in any way

that would have been sexual misconduct or considered sexual misconduct. >> when this case hit the front pages in the national news broadcast, what went through your mind? >> i was shocked. one of my friends from pennsylvania who i played football next to in college called me and made reference to sandusky, and it sounded bad. so i went home that night and i put on the internet. and i read through a lot of different documents, and then i read through the grand jury's report. i was just mortified. i'm pretty well grounded. i've worked on myself for a long time. but i was just taken aback and i said someone has got to start standing up and saying something for the survivors and saying they can make it, they can make it through. i'm tired of seeing these people create these thiefdoms where bad things happen and it's all brushed under a rug. >> let's talk some about that if you don't mind. i appreciate your courage coming forward this the sense that

coach sandusky is accused of taking advantage of underprivileged kids who came to his charity to get help, mentoring, tutoring. he's accused of violating just about every code of decency and morality. in your case, your mother was sick and a neighbor to console you, seemingly to help you, then turned into an abu bu sive relationship. what happened? >> i was young. my mom was diagnosed when i was 8 for melanoma. she went from for radical surgeries. my father was distracted and very stressed. at the time we all ran around. we were outside all the time. a neighbor faned interest in me and concern and pretty much it was exactly what happened with how jerry groomed his folks. fortunately i grew early and was able to stop it. my mom got me counseling for some concentration problems. in that counseling i was able to

share that i was being abused. i stopped it before that time, but when i shared that, the weight just lifted off my shoulders. so i'm trying to encourage people that have had that horrific experience to get out there and get some counseling with licensed people. it can happen to anyone. we had a good family. there was crisis in my family, that's for sure. that's one of the earmarks and one of the types of families that are often targeted in addition to underprivileged kids that don't have is a dad around and don't have the means to have that support. i'm just -- i really feel for these survivors. i want to tell them they can make it. >> i thank you for making that statement here. i want you to listen because i want to get your perspective. perhaps some of coach sandusky's victims or watching, or other people who are afraid to speak up or share their own stories. i want you to listen to some of the conversation bob costas had with sun dusky the other night where he's denying he committed crimes, but he does acknowledge

beyond bizarre, beyond rep when sive behavior. >> are you a pedophile? >> no. >> are you sexually attracted to young boys, to underage boys? >> am i sexually attracted -- >> yes. >> -- to underage boys? sexually attracted? i love young people. i love to be around them. but no, i'm not sexually attracted to young boys. >> matt, he went on in that interview to talk about horseplay in the showers and maybe inappropriate touching, but denying he did anything inappropriate of a sexual nature. given your experience, when you hear somebody like that talking, what goes through your mind? >> i'd like to make a clarification first. what jerry did had nothing to do with sex. it's all about power and control. it's like rape. it's attacking a very inferior or subordinate, submissive person that can't defend themself physically or

emotionally. it has nothing to do with sex. the drive of a pedophile is to control another person. the hesitation he had in there and the delay, i think he was trying to figure out what to sachlt he didn't come out and say, no, absolutely not. it's just disgusting. the second part, john, if you could refresh my memory, the second question you had for that? >> just the sense, when that goes through your mind -- we can move on because i want -- you understand the culture. you worked as a graduate assistant at penn state. joe paterno is legendary coach, an icon on campus, a god on that campus. jerry sandusky was the right-hand man, heir apparent, defensive coordinator at line backer university. i want you do listen when bob costas is asking him, even after the graduate assistant brought it to joe paterno's assistant, that he saw a rape in the shower. bob costas asked did coach

paterno ever confront you, to jerry sandusky. let's listen. >> did joe paterno have any information regarding objectional opportunities on your part prior to that report in 2002? >> many -- i can't totally answer that question. my answer would be no. >> did joe paterno at any time ever speak to you directly about your behavior? >> no. >> never? >> no. >> he never asked you about what you might have done? >> no. >> he never asked you if you needed help, if you needed counseling? >> no, no. >> never expressed disapproval of any kind? >> no. >> again, you understood the culture, you were there, you know the relationship between these two men. you know coach paterno. a graduate assistant comes to him and tells him he saw his right-hand man raping a young boy in the shower and joe paterno never says anything. is that possible? >> the whole thing just seems to have a bizarre connotations.

number one, coach knows everything that goes on down there, meaning coach paterno and he has his thumb on the pulse of everything. i know there was a strained relationship between jerry and coach. jerry used to come up to me and say, man, i hate that guy, i never really wanted to get engaged with that. i sort of minded my own business. you know, i don't know why. i can't figure out why. the whole thing -- i'd like to say, if i was -- i was four years younger than mike was when he was a graduate assistant. the power dynamic there is exceptional. coach not only has the most power on the campus, but probably in the state of pennsylvania, at least when i was there. he was reigning sportsman of the year in "sports illustrated." they were national champs. i think mike did what he thought he should have done, and that's gone to his superior, maybe not fast enough. certainly if i had been in that same situation and based on my

background, i think i would have -- the hardest thing i would have had to have done would have been not to have really totally incapacitated jerry. my major concern would have been to protect the child as should be anyone out there, if they've seen a child or aware of a child or they suspect a child is being hurt, they need to go and get -- alert the authorities. they need to make noise. they need to make this stop. this is just total deviation. my high school coach, i never lost a high school game and it was like a hoosiers experience for me. that's why i got into coaching. i wanted to help kids the way my coach helped me. he had a saying, we're only as good as our worst player. if you are that person, you better work your butt off. more importantly, if you know that person you better do everything in your power to help that person get better. i think that's what we need to do. we need to help these kids, these kids that are so left out there on an island. and what we have to do is to let the authorities take care of the

rest. i don't want to say who should have done what or why they should have done what. it's a tragedy all the way around. clearly, the well-being of a little boy was second nature to everyone involved there. that's the travesty there. >> so let me close by asking you this, and amen to everything you just said about trying to help these kids in putting them first. because of your experience with jerry sandusky, with the penn state program and the personal pain and the search you have had to get to where you are now, to have the courage to come out and talk about it f. you had five minutes from jerry sandusky, what would you say? >> he's a real pitiful man at this point. i might try to ask him to ask for forgiveness and try to go out and just admit -- self-awareness and self criticism is probably one of the hallmarks of a decent person, and we know and people lie, a

book written by m. scott peck. he really explores evil. constituted by narcissim, lying and selfish behavior. so, you know, i think this whole thing, there's been a perception projected by penn state for years. i think maybe he got so caught up in it, he can't distinguish the reality from what's really evil there. and i don't know if i could really talk to him, but i'd try to get him to realize that he's got to repent. he's got to go do something to make those kids feel better. he's got to do something to make the situation better. it's horrific. but i will tell you this, if i ever see a kid, and i'll let those kids out there know, you got at least one big guy in your corner. >> matt paknis, i appreciate your bravery, both from your experience at penn state and your own personal journey. i can't thank you for coming on

and sharing with us tonight. very much appreciate it. >> my pleasure, john. still to come, president obama tackles the china challenge and the penn state coach we just talked about who says he witnessed jerry sandusky raping a boy tells friends he stopped the rape. but the grand jury testimony says he didn't. the blockbuster impact of that next. i did it again. no worries, nick. [ sighs ] say, nick, you must be busy this holiday. oh, yeah, with all the great savings we got going on, it's been crazy. ooh, i got to dash away. customers lining up. ♪ [ male announcer ] this holiday, chevy's giving more. ♪ for a hot dog cart. my mother said, "well, maybe we ought to buy this hot dog cart and set it up someplace." so my parents went to bank of america. they met with the branch manager and they said, "look, we've got this little hot dog cart,

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the strength of the prosecution's case against accused child rapist jerry sandusky could boil down to this question, did he or didn't he? did penn state graduate assistant mike mcqueary notify police after claiming to see sandusky raping a boy in the showers. the grand jury indictment says mcqueary, quote, saw a naked boy, victim two, whose age he needed to be ten years old with his hands up against a whaul being subjected to intercourse by a naked sandusky. the graduate assistant was shocked but noticed that both victim two and sandusky saw him. the report says he called his father, then met with joe paterno, no mention of calling police. the morning call newspaper sent

it last week insisting he did have discussions with police and university officials in charge of police. i did stop it, not physically, but made sure it was stopped when i left the locker room. no one could imagine my thoughts or wants to be in my shoes for those 30 to 45 seconds. trust me. mcqueary is clearly trying to rebut criticism he didn't do enough to stop sandusky and to alert authorities. in doing so, could he be undermining the prosecution's case. wendy murphy is a former child abuse and sex abuse prosecutor and trent copeland, a prominent attorney. if you are sandusky's lawyer tonight and mcqueary appears to be telling a conflicting account, how do you use that to help the defense? >> first we need to establish whether this is confirmed. remember, if, in fact, mike mcqueary saw this and bent to the police, that really changes the game. this could be an effective game-changer for everybody involved in this case. if he saw this, he intervened,

went to police. you would expect that would be contained in the grand jury report. the grand jury report is where evidence is taken, you're under oath, you have to tell the truth. if you didn't say it there, why is he saying it there. if we take him at his word, that he did intervene and went to police, the question becomes why didn't the police then investigate? are the police now covering up the fact they didn't investigate? and are they also on the take? i don't want to sound the alarm of the conspiracy theory in every corner, but this case continues to get stranger and stranger. so, look, this is a setback for the prosecution. if mike mcqueary is saying, look, i told the police this and it's not contained in the grand jury report, somebody is lying. >> wendy, if you're the prosecutor in this case, number one, you don't want your witnesses talking in public in any case, especially a case so sensitive. when you have a grand jury report that says one thing and e-mails from the only alleged eyewitness we know of that says other things, i assume that has to worry you because it makes the credibility of a very, very

important witness in question. >> he is a very important witness, no doubt about it. the prosecution may well be glad that he's at least generating some sympathy for himself because we don't want all the potential jurors thinking he's a monster who let a child be raped. they may be secretly glad he said a little bit about this. i don't agree with trent that the grand jury report is the final document. it's a 23-page summary of thousands of pages of testimony. so if you read it with regard to what mcyear rhee did, it says he saw a situation, he was upset and he told his father, told paterno and so on. it's silent as to whether he did other things which doesn't mean he's inconsistent when he says he also told police. really the key i think in terms of the 23-page grand jury report which is a summary, the key there is to describe the ways in which these institutions engage in a coverup, if you ask me, and to put out the bare bones facts about the crimes that happened

to these children. i'm not sure it's an inconsistency. i think it does help generate some sympathy for him. look, maybe he told the university cops what he saw, but that's not necessarily going to get you anywhere if you're trying to get outside law enforcement to get involved. remember, so many people at penn state all the way up the ladder to the president knew about this anal rape and either are under indictment for pernlgry for lying about what they knew or lost their jobs. the fact he may have told a university cop that there was this anal rape in the shower and that cop wouldn't do anything, wouldn't change much of the vor story if you ask me. >> trent, the apparent inconsistency seems to be about whether or not mike mcqueary went to law enforcement authorities whether he called his dad and met with joe paterno the next day. he hasn't changed his story on the most important point, what he saw, which if you're the defense lawyer, that's what you're worried about most. >> that's what you're worried

about most. that is the operative fact. look, i couldn't agree more with wendy when she says that is an important omission. look, this is a key element in this case. what did penn state do? what did those officials do? what did the police do to stop this? not only if penn state knew about this and local law enforcement knew about it, not only is there a coverup of massive proportions, these people are also similarly potentially responsible from a civil standpoint in terms of what sandusky did after they were aware of this information. look, it's critical. it's important. and it's not just a small omission. it's not just a minor misstatement. it is a fundamental positively important critical detail. if you intervened, that's important. if you then went to the police, whether campus police, local law enforcement, law enforcement in the town, whether you went to someone and you told them that information is also key and fundamental in this case in

terms of who knew what, what they did when they got that information and why this was allowed to continue to go on. i think it's an important piece of information. i think the fact that it isn't there is fundamentally key to this case. >> i think an interesting question is, when he says that after he walked away he did put a stop to it, what does that mean? how do you put a stop to a rape after you walk away? it suggests to me there's more to the story. i guarantee you the prosecutors know everything he said, everything he did. the fact that it's not in this grand jury report tells us nothing at all about the integrity of his testimony or his credibility as a witness, again, on the key question, what did he see, what did he do about it? i don't think this man's credibility has been undermined at all. mabel we like him a little bit more because he did do something and we just haven't known about it until now. >> appreciate your help with an important legal question as we watch the case go forward. ahead, tonight's truth is about whether the obama administration could have, should have protected you from

more than a half billion dollar bill. first he said he was hired as a historian, now he concedes it was for plight dal advice. newt gingrich and freed difficult mack. turns out he's bashing an agency that put a lot of money in his bank account. the president of the united states is half a world away addressing the parliament in australia. >> pay respect of the past and present of all of australia's indigenous peoples. with lactose intolerance... lactaid® milk. the original 100% lactose-free milk. [ male announcer ] it has an hd webcam, killer audio, and lids that switch to start every semester fresh. but mostly it helps me try new moves on and off the court. ♪ [ male announcer ] featuring windows 7 and windows 7 live messenger.

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vice or virtue? you make the call. former house speaker newt gingrich was paid more than $1.6 million over a five-year period for consulting work to freddie mac. it gets a lot of the blame for the subprime lending mess and the housing bubble. don't take that from me. listen here. >> they talk about financial reform and they skip past fannie mae and freddie mac which are the two biggest debtors in the american system and the most dangerous companies for imploding. the odds are very good that the next great crisis in finance is not going to be banks, it's going to be fannie mae and freddie mac who, by the way, are impervious to the politicians.

>> yep, same newt gingrich. in iowa today the speaker defended his work? >> i was approached to offer strategic advice. i was glad to offer strategic advice. we did it for a number of companies. gingrich group was very successful. >> do you think you were just being bought? >> no. i don't think that anymore than your institution being bought when people advertise on it. >> gingrich disputed the notion a big contract would undermine at all his clean up washington focus on the campaign trail. >> it reminds people that i know a great deal about washington f. you want to change washington, we tried four years of amateur ignorance, and it didn't work very well. >> is it a really good thing or hypocrisy. for more we're joined by james

carville, with me in washington cnn political contributor ed eric ton and former newt gingrich ally, rich. >> i want to put more of this on the record. there's no suggestion he did anything wrong. he was a private citizen after leaving the congress, hired by freddie mac as a consultant, making $1.6 million. here is something he said to bill o'reilly on september 29, 2008, again in that time frame before and after he's getting consulting money from freddie mac. here is what he says. one of the provisions i wanted to put into any kind of financial package is no company gets money from the treasury in this process, be allowed to hire a lobbyist. what you have today is the rich on wall street and the powerful at fannie mae and freddie mac had so many politicians beholding to them, in fact, nobody was going to check them and they got away with things that were absolute baloney and it's a tragedy.

rich, you first, since you know newt. >> i don't have any problem with that. in washington, two things. one, everybody knows if you're a consultant, you are paid to give advice, not paid to make the client take it. we don't know what advice newt gave them. that's number one. number two, in washington, this is probably an inside the beltway deal, there's a fairly narrow range of activities that we consider lobbying. and being -- giving stra steejic advice, even picking up the phone and calling a member of the house or senate really doesn't constitute lobbying. you don't have to register for it. it's difficult min muss. >> i'll take him at his word he didn't lobby. but you know how this works. a lot of people do it. newt is not alone. former majority leader george mitchell. former majority leader bob dole. if you walk down k street,

you'll see members who get paid to arrange meetings or to say i think congressman x would be on your side, avoid congressman y, he doesn't like you. it's all legal. but when you're running to president saying send me to washington to fix it, it undermines your case, doesn't it? >> he taught my case at tulane. so full disclosure. i agree with what rich says. the truth of the matter is people are watching this. to use a sports metaphor, nobody recovers their own fumble in this republican nominating process. every fumble has cost these candidates dearly. i expect this one will cost the speaker substantially. i can't say he can't bounce back from it. this will tie him in a knot pretty good. >> seven weeks to vote until iowa, erick erickson. here is our nationality poll first. romney, gij rich, cain.

it's meaningful. more meaningful frngs how does he look in the key states? iowa votes first. 20% for cain, 19% for paul, 18% for romney, 17% for gingrich. in contention in iowa. a person who needs to do very, very, very, very well in iowa is congresswoman michele bachmann. she today smells a little blood. >> whether former speaker gingrich made $300,000 or whether he made $2 million, the point is that he took money to also influence senior republicans to be favorable toward fannie and freddie. while he was take that money i was fighting against fannie and freddie. i believe they need to be shut down. i wasn't shilling for them. i was fighting them. >> i remember the conversation we had three months ago about michele bachmann taking farm subsidies. what goes around comes around.

then and now. exactly. i talked to a very prom meant conservative in washington who said this is the one allegation about newt that bothers him because if you feel there's an an tip think towards washington, maybe towards barack obama, mitt romney, newt gingrich, there's an issue with newt gingrich having been up here so long, how do you run against washington when you're a creature of washington. >> here is the mistake newt made today. he said the gingrich group did very well. every reporter in town are going to be wondering what other contracts are there? >> to their credit, they put out a statement. i would say herman cain candidacy take note. they say he welcomes scrutiny of his record in public office and as a small businessman. they make the point he never lobbied. you're the democrat in the room. if you were advising him today, the question is can he put it behind him? what does he need to do? >> he's got to do things like put out his fact sheet.

he has to be very direct. in our deal in 1992 we went on "60 minutes" right away. it's not going to go away. it's going to cause him some damage. it may not be fatal. he may come back. that i don't know. the question -- there were a lot of political types from washington and new orleans at a bipartisan summit, everybody is saying who does this help? the consensus is maybe this might give perry an opening to come back to being the alternative. that i do not know. i'm confident this is going to extract some toll on the former speaker. >> a similar lesson to be learned from 2008, rudy giuliani and his giuliani group and who they did or didn't lobby for. because they didn't release the list of clients, it did drag it out. >> transparency, transparency, transparency. next the house of representatives takes an important vote on gun rights. later president obama says the notion we should fear china is

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here is the latest news you need to know. state police arrested a man wanted in connection with friday night's shooting incidents with one bullet that struck a white house window.

the arab league is giving syria three more days to end the violence against civilians but isn't saying what will happen if the syrian government ignores that ultimatum. a witness says protesters stormed kuwait's parliament demanding the ousting of the prime minister. volkswagen passat won the car of the year award today. aisle prices back up $100 a barrel today. that news plus europe's debt crisis with stocks sharply lower. erin burnett is here with a preview of "outfront," looking at a very important question. could china overtake the united states as the global superpower? >> the president in a few moments will be addressing the australian parliament, putting more u.s. marines in australia. they don't want to say the reason why. but the reason why is because the u.s. is trying to show china who is boss. when you look at who does all the business with australia, it actually is china.

the markets fell, part of that was fear about europe and fear about the super committee. south dakota's christy snoem will talk about whether tax increases are on the table, whether they have what it takes to get the deal done. a man who just won $100 million in a sex abuse case against a priest in miami. like erin, we're fascinated by the china challenge. when we come back, general michael haden answers this question. china, friend or foe? electric. i don't think so. it's got a gas tank right here. electric tank, right over here. an electric tank? really, stu? is that what you pour the electricity in? it's actually both, guys. i can plug in and go 35 miles gas free, or i can fill up and go a whole lot farther. is that my burger? oh. i just got bun. i didn't even bite any burger.

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pictures of the president of the united states, barack obama, he's in australia addressing the australian parliament. on the president's mind a key relationship with australia, but a huge security challenge in the south pacific and throughout the china seas which brings us to tonight's number. $91 billion. that's what the united states government projects china will spend on the military in 2011. go back to 2000, $20 billion. look at that steady growth in chinese defense spending. there's a reason the united states is a bit concerned about this. if you look at this here, this red area here, this is what china says are its territorial waters. the united states and others disagree. they say the bluer lines are international waters. one thing the president is doing today in australia is announce

agnew security commitment. about 20,000 marine also be stationed here in darwin. we know about the economic relationship with china. that's complicated, the president says, but he also says not to worry. >> i think the notion that we fear china is mistaken. what we have said is the future of this region depends on robust trade and commerce, and the only way we're going to grow that trade is if we have a high standards trade agreement where everybody is playing by the same rules. >> the president says not to be feared. let me put that question to the next former cia director, michael hayden, retired general from the u.s. air force. i like to phrase the question this way. china, friend, foe or don't know? >> china is not an enemy of the united states. john, there are logical, nonheroic policy choices available to us and the chinese that keep this relationship

within bounds. look, it is forever going to be competitive. there are times when it's going to be confrontational. it never has to get to the level of conflict. all that said, when i give speeches about security concerns, china is always among my list of three, four or five areas we have to keep an eye on. it doesn't have to be an enemy of the united states. you say it doesn't have to be. even a very modest commitment, 2500 u.s. marines eventually. it will take a long time to build that up. in a country, australia, that has been a u.s. ally. they say today australia cannot play china for a fool. it is impossible for china to remain detached, no australia itself will be caught in the cross fire. that's tough language. >> it is pretty tough. it's not particularly useful either. it really doesn't reflect the true understanding of china's interests. look, we have telegraphed for more than a year that we're

shifting our weight, moving our forces more in the direction of east asia. moving our forces away from ground forces and more in the direction of forces that control access. marines, naval forces, air forces. why are we doing that? we're trying to continue a balance in east asia. doing that in concert with our allies like australia, but not limited to australia. the way i put it starkly, this is not preparation forward with china, not threatening china. it's creating a balance that makes it much more difficult for anyone in china in five, ten or 15 years to do something both they and we would regret. >> let me ask you to come over to the wall. if you're trying to create a balance, that means you're addressing what you consider to be an imbalance. look at this compared to other countries in the region. this is china's defense spending. that's pretty astounding. if you look again at the weapons modernization, if you look at 2008 to 2010, surface forces,

submarine forces, air defense forces. china is getting about this in a very busy way. a lot is about this. a lot of their new surface-to-air missiles can reach ships here. you say not to worry. >> no, i didn't say not to worry. i said it was an item of concern. i said china is not necessarily an enemy of the united states. there are aspects that are quite disturbing. this one in particular. that's 1.2 million square miles of you and i would consider to be open ocean. they want to treat it the way we treat lake erie. they call it chinese core interest. we can't let that stand. what you've got is the neighborhood here welcoming an increased american presence to balance what they see as this potential dachker coming from china. >> the neighborhood welcomes the president, not china. we can walk back over to the table. how much does the economic dependence of the united states, they hold a great deal of our debt, a critical trading partner

at the time we want the united states economy to start growing again. how much does that complicate the security relationship? can the president be as tough as he would like at a time when china with a few pulls of the lever could mess with our economy? >> i think the president has more headroom, more freedom to maneuver on these security questions than much of the public commentary would suggest because of the economic relationship. remember we have some dependence on china, but china has great dependence on the united states. i don't think we will unnaturally control or keep in check things we should be legitimately doing for our national security purposes. >> you're former li in the spy business. one of the waying during the cold war eventually that we didn't have something go off the rails with the soviet union is there were channels of communication. are there those levels of communication at the security level, at the defense and at the intelligence level now that, if somebody does misjudge somebody we can quickly turn the volume

down? >> not nearly as robust as they need to be. there are some. the chinese use the military-to military relationships we've developed with them as a tool to punish us. they cut them off when we do something they view to be offensive. that's an example of chinese behavior that's not in their interest or our interest either. >> general hayden, appreciate your insights. this is the challenge of the next generation. next, the truth about a scandal costing taxpayers, that means you, a half billion dollars. we're america's natural gas and here's what we did today: supported nearly 3 million steady jobs across our country... ... scientists, technicians, engineers, machinists... ... adding nearly 400 billion dollars to our economy... we're at work providing power to almost a quarter of our homes and businesses...

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energy secretary steven choiu will be on cal toll hill and you have more than a half billion reasons to pay attention. he was a key player in a big loan guarantee to solyndra, loan approved ge spite some warnings that the company wasn't worthy. then the deal was renegotiated in a way that makes it harder for taxpayers to recover any losses. and then, yes, you guessed it, the company went belly up, meaning the taxpayer is now liable for some $530 million. secretary choiu has declined repeated requests to come on the program. he talked to npr yesterday insisting there were noshen nan gans involved in the solyndra loan. >> we didn't cut corners. we made it more thorough and diligent. we kim prove the process so it typically would take something in the order of one year to do all the due diligence.

>> here is the truth, where there is smoke, there is not always fire. but there's a lot of smoke around the solyndra loan, especially around questions of whether politics clouded policy judgments. we know, for example, the a provl in september 2009 came despite warnings from some policy folks that this just wasn't ready for prime time. >> it's so important we invest in solyndra and what they're doing, not just to get us through today, but to power our way to a much brighter tomorrow. >> eight months later, this presidential visit solidified sol drin lynn draw as the clean energy poster child. five months after that, october 2010, solyndra's ceo wrote a letter to the energy department saying word of the company's struggles was beginning to leak to reporters and investors and it was necessary to lay off workers. ceo brian henderson said, quote, i would like to go forward with the internal communication on thursday, october 28.

you think solyndra was just another company, just another loan? harrison's e-mail was forwarded like wildfire to top officials at d.o.e. and also at eop and ovp. what are those initials? that's washington shorthand for executive office of the president and office of the vice president. you think the vice president's chief of staff was expecting an e-mail if they decide to lay you off or lay me off? an e-mail two days later from so lynn draw's top investor detailed the administration's top response saying doe pushed for us to hold our announcement of the consolidation to employees and vendors to november 3rd. oddly, they didn't give a reason for that date. november 3rd was one day after the november 2010 election. the white house didn't want sol drin lynn draw's troubles front and center just before an election in which stimulus spending was already a big issue.